What we know (and what we don’t) about health insurance exchanges

The rules around health insurance exchanges are dynamic and evolving all the time. Some agents fear that these exchanges could displace us, in the same way that Travelocity displaced many travel agents. Others argue that because health insurance is a much more complicated purchase than a plane ticket and because consumers are likely to be confused by these new channels, our expertise and advice will be even more crucial.

Hopefully, the role of agents will become clearer as time goes on. In the meantime, here’s an overview of what we know and what we don’t know about health insurance exchanges.

Health Insurance Exchange: A Definition

A health insurance exchange is an online marketplace where individuals and small businesses can shop, compare, and purchase health insurance. Think of it like Expedia or Travelocity for health insurance. No one is required to use an exchange; it is an additional channel that is added to the market.

Some states, including Colorado, where the Alliance Insurance Group is based, are taking the initiative to build their own exchanges, which are allowed by federal law but subject to certain guidelines. States that choose not to create their own exchanges before 2014 will need to use the federal exchange.

States that build their own exchanges often cite a desire to control their own destiny and tailor their exchange to the needs of the local population. States that have rejected swap proposals often cite their reluctance to support any aspect of the federal reform bill, which they hope will be struck down by the Supreme Court.

In general, insurance exchanges allow consumers and small businesses:

  • Find and compare health plans, which must include certain standardized benefits.
  • Determine eligibility for premium relief in the form of tax credits.
  • Call or sit down with someone who can help explain the various benefits and features of the plan.
  • Enroll in a plan.

Below are some of the highlights of health insurance exchanges for independent insurance agents.

Consumer access to agents

The National Association of Health Insurers (NAHU) is pushing for an agent contact option to be included within the exchanges’ online systems. This could be structured similarly to the national web-based portal for home sales, which presents listing information in a standardized format, but also connects prospective home buyers with a state-licensed real estate agent.

Importance of certification

NAHU also believes that all agents participating in exchanges must pass an annual exam that addresses private coverage, public assistance, and options eligible for subsidies to ensure familiarity with all coverage options available to consumers. This knowledge is important to both officers and individuals in the new role of “healthcare navigator.” Boaters will receive federal funds to help educate the public, distribute enrollment and premium credit information, and provide enrollment assistance. NAHU believes that boaters duplicate the role of licensed agents and questions the wisdom of spending federal money on these positions. But if boaters are used, they must be subject to the same rigorous licensing and continuing education requirements as agents.

Marketing limits and commissions

There has been talk of restricting agents’ marketing activities and commissions related to their activity within exchanges, which NAHU strongly opposes. The reason is that the precedent for such restrictions, Medicare Advantage, does not apply here at all. For the under-65 and small business health insurance markets, potential clients often want agents to provide additional information on life, dentistry, disability, and other elements of the typical employee benefits package, in a single meeting.

Regarding fees, we believe that these should be determined by private health insurers, as they are today. That said, health plans have already begun cutting fees in response to other aspects of health care reform, such as administrative vs. medical loss rate requirements. The best insulation against commission cuts is to join forces with a General Administrative Agency (MGA) that can consolidate the commercial activity of many agents, guaranteeing insurers a high volume of business.

Will exchanges really help?

It’s safe to say that “the jury is out” on this matter.

Will exchanges lower premiums? The answer depends largely on how the risk groups are structured. Some argue that separate groups for individuals vs. Small businesses are the fairest, as premiums more accurately reflect the risks in these two very different markets. Others say that combining the groups would allow the spread of risk on a broader basis, facilitating lower prices for all.

Will exchanges improve the general health of the population? The hope is that, among other things, costly emergency room visits will decrease once a higher percentage of citizens are covered. Others retort that those with low benefit / high deductible plans are also reluctant to seek preventive care or even acute care until absolutely necessary. Will exchanges improve the healthcare shopping experience? Possibly. In theory, lining up “apples to apples” benefits should make shopping easier, as long as it doesn’t result in a large number of identical and indistinguishable plans that blur and further confuse the consumer.

Like so many other facets of health care reform, we, as agents, may have to embrace change and adapt as best we can to the changing landscape. There is strength in the numbers: Through your local professional organization and a good MGA who has helped you with your insurance agency’s business plan, you can navigate these changes as gracefully and knowledgeably as possible.